The following information applies to the products of Stuart Company. Product A Product B Selling price per unit $ 14 $ 12 Variable cost per unit 11 8 Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately. Required One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 4 hours of labor to produce. Due to labor constraints, demand is higher than the company’s capacity to make both products. The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products. Expected sales of Product A and Product B are 13,000 units and 12,000 units, respectively. The maximum number of machine hours available is 41,000. Product A uses 3 machine hours, and Product B uses 5 machine hours. The company can sell all the products it produces.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The following information applies to the products of Stuart Company.
| Product A | Product B | |||||
| Selling price per unit | $ | 14 | $ | 12 | ||
| Variable cost per unit | 11 | 8 | ||||
Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately.
Required
-
One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 4 hours of labor to produce. Due to labor constraints, demand is higher than the company’s capacity to make both products.
-
The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products. Expected sales of Product A and Product B are 13,000 units and 12,000 units, respectively.
-
The maximum number of machine hours available is 41,000. Product A uses 3 machine hours, and Product B uses 5 machine hours. The company can sell all the products it produces.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
